The United States Supreme Court (SCOTUS) has issued two opinions in the past week that could have long-term effects on the way the U.S. Securities and Exchange Commission (SEC) handles enforcement actions against companies, including those in the crypto industry.
In a 6-3 decision made on June 27 in SEC v. Jarksey, the majority opinion of the court held that defendants in an SEC civil case involving securities fraud are entitled to a jury trial, rather than being strictly decided by an administrative law judge. The conservative members of the court considered “common law fraud principles when interpreting federal securities law common law fraud,” which seemed to equate an SEC civil case involving securities fraud to a criminal case involving fraud.
Following the SEC v. Jarksey decision, the court issued an opinion on June 28 in Loper Bright Enterprises v. Raimondo, overturning a 1984 ruling that established the Chevron deference. Although the SEC was not explicitly mentioned, the court’s opinion would require lower courts to independently decide whether an agency has acted within its statutory authority, rather than deferring to federal agencies’ interpretation of the law.
Sheila Warren, CEO of the Crypto Council for Innovation, stated that these decisions directly impact the crypto industry, as they raise questions about the role and power of regulators like the SEC.
In her dissent over the SEC v. Jarksey decision, Justice Sonia Sotomayor referred to the majority opinion as a “power grab” over policymaking in the U.S. Congress. Justice Elena Kagan wrote a dissent in the Loper decision, stating that the majority had a pattern of reversing “settled law” and “overhaul[ed] a cornerstone of administrative law.”
The impact of these decisions on the SEC’s filing enforcement actions against crypto firms could overwhelm the court system, according to Joseph Lynyak, a partner at the international law firm Dorsey & Whitney. He stated that courts following SCOTUS’ overturning of the Chevron doctrine may be inundated with private parties litigating and relitigating an agency interpretation, potentially creating conflicting decisions by lower courts.
Representative Maxine Waters expressed concern about the Supreme Court’s rulings, stating that they have overturned important legal precedent and made it easier for big corporations to benefit at the expense of ordinary people and escape civil penalties.
Additionally, the Supreme Court issued several opinions near the end of its term that could have lasting implications for the SEC and the U.S. presidency. On July 1, in a 6-3 ruling, the justices stated that former President Donald Trump had “at least presumptive immunity from prosecution for all his official acts” while in office.
Both of these SCOTUS decisions came as the SEC filed an enforcement action against Consensys, the parent company of MetaMask, alleging that Consensys operated as an unregistered broker and engaged in the unregistered offer and sale of securities through MetaMask Swaps.